Lawmakers call for raising tariffs, cutting economic ties with China

Bipartisan lawmakers on Tuesday called for further severing economic and financial ties between America and China, including revoking the low tariff rates the United States gave to Beijing after it joined the World Trade Organization. business more than two decades ago.

The House of Representatives Select Committee on the Communist Party of China has released a wide range of recommendations aimed at resetting economic relations between the United States and China. The reportwhich was signed by both House Democrats and Republicans, argued that China had waged a “decades-long campaign of economic aggression” that had weakened American businesses, dominated crucial global industries and left the United States United very vulnerable in the event of a wider military conflict. .

The 53-page report included nearly 150 recommendations that Congress and the administration could adopt to compensate for these vulnerabilities. They ranged from imposing new tariffs on older types of Chinese chips to further cutting off flows of capital and technology between the world’s largest economies.

Other recommendations in the report included requiring publicly traded U.S. companies to disclose their ties to China and invest more in U.S. research and manufacturing capacity to counter Chinese dominance of sectors such as pharmaceuticals. and critical minerals. He also develops plans for economic coordination with suggested allies if the Chinese government invades Taiwan.

Many recommendations may never be adopted by a fractious Congress. But the report could pave the way for bipartisan legislation on China in the coming months.

Rep. Mike Gallagher, Republican of Wisconsin and chairman of the committee, said in an interview that he would like to see Congress come together on a major bill on China next year, before the presidential election. He said that while some U.S. companies oppose restrictions on doing business with China — a large and growing market — legislation clarifying what is allowed would be beneficial for many companies.

“If Congress doesn’t step up and act legislatively,” Mr. Gallagher said, “we’re just going to be bouncing between different executive orders that have very different rules that are creating chaos on Wall Street and in the market .”

The report is a tangible sign of how the bipartisan consensus on China has evolved in recent years.

A decade ago, the most popular argument was that economic interdependence between the United States and China would be a force for peace and stability. Some — including Biden administration officials — still say trade ties can help stabilize relations and promote peace.

But that theory is increasingly giving way to fears that ties with China could be weaponized in the event of conflict. It could be catastrophic for the U.S. economy or military, for example, if the Chinese government cut off shipments to the United States of pharmaceuticals, minerals, or components for weapons systems.

Beijing’s subsidies to Chinese companies and incidents of intellectual property theft have also become a growing source of friction. In some cases, China allowed foreign companies to operate in the country only if they formed partnerships transferring valuable technologies to local companies.

The report states that the United States has never faced a geopolitical adversary with which it is also economically linked and that the extent of the risk of relying on a strategic competitor remains unknown. The country does not have a contingency plan in the event of a new conflict, he added.

“Addressing this new conflict will require a fundamental reassessment of U.S. policy on economic engagement with the PRC as well as new tools to confront the PRC’s campaign of economic aggression,” the report said, using the Abbreviation of People’s Republic of China.

This year, the committee held a tabletop exercise to simulate how the United States would react if the Chinese government invaded Taiwan. It finds that U.S. efforts to deter China through sanctions and financial punishments “could result in enormous costs for the United States,” the report said.

Lawmakers said they were not advocating a complete “decoupling” of the U.S. and Chinese economies, but that the country needed to find a way to reduce Beijing’s influence and make the United States more economically independent.

The report includes a variety of other recommendations, including increasing the authority of a committee to review foreign investments for national security threats and developing new high-level trade agreements, in particularly with Taiwan, Japan and Great Britain.

But the report’s first, and perhaps most important, recommendation is the gradual introduction of a new set of tariffs for China over a short period of time.

When China joined the World Trade Organization in 2001, the United States and other members began offering China lower tariffs to encourage trade. In return, China began undertaking a series of reforms to bring its economy into compliance with the organization’s rules.

But the report claims that China has never succeeded in implementing promised reforms and that the “normal and permanent trade relations” that the United States granted to China after its succession to the WTO have not leads to the economic benefits or reforms Congress expected. The report says Congress should now apply a different, higher set of tariffs to China.

Such a move was debated by lawmakers and was supported by former President Donald J. Trump and other Republican candidates. Last year, Congress voted to revoke normal, permanent trade relations with Russia after its invasion of Ukraine.

But raising tariffs on China, one of the United States’ top trading partners, would spark more opposition from businesses, as it would raise the costs of goods imported from China and slow most likely economic growth.

The United States already imposes significant tariffs on many Chinese products, which were imposed during the Trump administration’s trade war and which President Biden is still revising. Other changes suggested by Congress would increase levies on other products, such as toys and smartphones, that have not attracted additional taxes.

HAS study published by Oxford Economics in November and at the request of the American Business Council in China, estimated that such tariffs alone would cause a loss of 1.6 trillion dollars to the American economy over a five-year horizon. It would also risk further friction at the World Trade Organization, where the group’s most loyal supporters have already accused the United States of undermining its rules.

Liu Pengyu, a spokesperson for the Chinese embassy, ​​said economic relations between the United States and China were “mutually beneficial” and that the proposals “would not serve anyone’s interests.”

The report goes against “the principles of market economy and fair competition, and will undermine the international economic and trade order and destabilize global industrial and supply chains”, he said.

The Retail Industry Leaders Association, a trade group that includes Target, Home Depot and Dollar General, said in a statement Tuesday that it was concerned about the recommendations. Raising tariffs on Chinese goods “would only hurt American businesses and invite retaliation from China,” he said.

The lawmakers’ report acknowledged that such a change would be an economic burden and suggested that Congress consider providing additional credits to farmers and other aid to workers.

Mr. Gallagher said it would not be easy to extricate the United States from its “deep economic entanglement” with China, and that Washington should work to develop alternative markets and prepare for possible retaliation from the part of Beijing.

Reaching consensus on the report took months of negotiations between Democrats and Republicans, which its authors said should send a message to China. Only one member of the 24-person committee voted against the report: Rep. Jake Auchincloss, a Massachusetts Democrat concerned about protectionism.

“One of the CCP’s theories about the United States is that we are divided, that we are tribal, that we are incapable of coming together to meet challenges,” said Rep. Raja Krishnamoorthi of Illinois, the top Democrat on the committee, referring to the Chinese Communist Party. “On this particular issue of competition between the United States and the CCP, we are of the same opinion. »